Cross-Border Shopping Rules Have Changed

The rules for cross-border shopping have changed. You can now bring back $200 worth of goods duty free, instead of $50, on 24-hour trips. The limit has been doubled for trips of 48 hours, all the way up to $800.

The Canadian dollar is presently high compared to our cousins in the south. This is when Canadians flock to the border to cross into the U.S. to take advantage of the price of goods, which are consistently priced considerably lower for the same goods. See Canada/U.S. Price Gap & Cross-Border Shopping Chart.

According to a report by the Bank of Montreal, there are already more than 50 million visits to the U.S. by Canadian residents annually. Those numbers will likely swell when the new duty-and-tax free limits kick in.

We Canadians do enjoy shopping, and we love getting a bargain. You can see the proof of that in the utter joy so many have expressed that American discount chain Target is setting up shop here in 2013. It’s almost as if fresh drinking water was being brought to a dusty, remote village. Hey everybody, our lives are improving! Hallelujah!

So no surprise that most Canadians cheered the new cross-border shopping limits set out in last week’s federal budget. You can now bring back $200 worth of goods duty free, instead of $50, on 24-hour trips. The limit has been doubled for trips of 48 hours, all the way up to $800. If you can’t wait for your local Target to open, or if you crave the high-octane rush of other types of American retail, this is good news.

Canadian border guards are silhouetted as they replace each other at an inspection booth at the Douglas border crossing on the Canada-USA border in Surrey, B.C.(Darryl Dyck/The Canadian Press)

But a lot of small business owners in border towns across the country are not exactly thrilled with the government’s new provision. Quite the opposite.

“I don’t understand it,” says Marq Smith of Langley, B.C. “The government is supposed to be in our corner, not encouraging people to go south to spend their money. And they’re hurting themselves too, losing tax revenue. This doesn’t help us as Canadians at all. I can’t figure out the logic.”

Smith owns Western Powersports, a motorcycle store ten minutes from the U.S. border. He employs 11 people, running the local Yamaha and Triumph dealership, selling bikes as well as parts and accessories.

“With the dollar at par, it hurts us,” he says. “Some things are cheaper south of the border, and if a guy can save 20 or 30 per cent by taking a little ride, I can’t say I blame them. But why encourage it?”

Finance Minister Jim Flaherty was asked that question by reporters during a media scrum that followed a luncheon in Toronto last Friday. More than a few retailers had already voiced their concern about the new limits announced the day before.

Finance Minister Jim Flaherty meets with private sector economists in Ottawa on March 5. He says concerns over the increase in cross-border shopping allowances are misguided.(Sean Kilpatrick/The Canadian Press)

“I am not terribly concerned about the cross-border shopping because we haven’t changed the 24-hour rule,” said Flaherty, pointing out that zero is still the allowance for duty-free goods if you’re out of Canada for less than 24 hours. As for the changes, he mentioned that Canada is trying to “harmonize” its policies with those in the U.S.

That harmonization has a price. Some estimates suggest the change will cost the government $13 million in lost duty by 2012-13 and $17 million in 2013-14. That may indeed be small change and of little concern when a multi-billion dollar budget is being crafted — but it’s a bigger deal for entrepreneurs.

“Mom and pop shops in border towns are being decimated,” says Smith. As for the damage to his revenue stream, he admits the new rules won’t exactly put him out of business, “But every little bit hurts,” he says.

Smith says he’s always pointing out the benefits of shopping locally, both in email blasts to customers, and during visits with customers at the store.

“All kinds of people are buying stuff on the internet, or driving down to pick something up — but what do they do when there’s something wrong with it? By the time they ship it back to where they bought it, they’ve lost whatever money they think they saved buying it in the U.S.”

Also, factor in the cost of gasoline for that trip, and whatever savings can be reaped by an American shopping trip quickly vaporize.

But it’s not only the prices that entice Canadians to shop in the U.S. You often hear the comments that the customer service is superior at American retailers.

What are duties and taxes?

Duty is a tariff payable on a good imported to Canada. Rates of Duty are established by the Department of Finance Canada and can vary significantly from one trade agreement to another.

No duty is payable on goods imported for personal use, if it is marked as “made in Canada, the USA, or Mexico”, or if there is no marking or labelling indicating that it was made somewhere other than Canada, the USA, or Mexico.

More information on duties payable on all goods imported into Canada is provided in the Customs Tariff.

Most imported goods are also subject to the Federal Goods and Services Tax (GST) and Provincial Sales Tax (PST) or, in certain provinces and territories, the Harmonized Sales Tax (HST).

Are you eligible for a personal exemption?

When you return to Canada, you may qualify for a personal exemption. This allows you to bring goods of a certain value into the country without paying regular duty and taxes, except for a minimum duty that may apply to some tobacco products.

The length of your absence from Canada determines the amount of goods you can bring back, without paying any duties. You are eligible for a personal exemption if you are one of the following:

A Canadian resident returning from a trip outside Canada.

A former resident of Canada returning to live in this country.

A temporary resident of Canada returning from a trip outside Canada.

Even young children and infants are entitled to a personal exemption. As a parent or guardian, you can make a declaration to the CBSA for a child as long as the goods you are declaring are for the child’s use.

For more detailed explanations of what constitutes a personal exemption, consultI Declare.

Using our Duty and Taxes Estimator

The CBSA’s Duty and Taxes Estimator provides an estimate only and applies strictly to goods imported for personal use. The final amount of applicable duties and taxes may vary from the estimate and will be determined by a border services officer when you arrive at the border.

It is important to note that personal exemptions, tariff classification, applicable rates of duty and taxes and other circumstances that may affect the amount of duties and taxes owed on imported goods are subject to change from time to time, depending on the applicable legislation, regulations and policies.

Where specific products within a category of goods have different rates of duty, the highest rate has been used to produce the estimate.

Up to CAN$200 – Alcohol and tobacco cannot be claimed. Goods must be in your possession at time of entry to Canada. If the value of the goods you have purchased abroad exceeds $200 after a 24 hour absence, duty and taxes are applicable on the entire amount of the imported goods.

48 hours or more

Up to CAN$800 – May include alcohol and tobacco products, within the prescribed limits set by provincial or territorial authorities. Goods must be in your possession at time of entry to Canada. Travellers absent for periods of 48 hours or more will have the applicable exemption level credited against the total value of goods.

7 days or more

Up to CAN$800 – May include alcohol and tobacco products, within the prescribed limits set by provincial or territorial authorities. For the seven-day exemption, goods may be in your possession at time of entry to Canada but are also permitted to follow entry to Canada (such as via courier, mail or delivery agency), except alcohol and tobacco products, which must be in your possession. All the goods will qualify for duty- and tax-free entry if they are declared at the initial return to Canada.

You are allowed to import only one of the amounts listed in the table free of duty and taxes, as part of your personal exemption.

Tobacco product limits

Cigarettes

200 cigarettes

Cigars

50 cigars

Tobacco

200 grams of manufactured tobacco

Tobacco sticks

200 tobacco sticks

If you bring in more than your personal exemption, you will have to pay regular assessments on the excess amount. These regular assessments can include duty and taxes, as well as provincial or territorial fees. When they calculate the amounts owing, border services officers will give an allowance for products that have an excise stamp “DUTY PAID CANADA DROIT ACQUITTÉ”.

If you are 18 years of age or over, you are allowed to bring in all of the amounts listed in the table into Canada free of duty and taxes within your personal exemption.

If you include cigarettes, tobacco sticks or manufactured tobacco in your personal exemption, a partial exemption only may apply. You will have to pay a special duty on these products unless they have an excise stamp “DUTY PAID CANADA DROIT ACQUITTÉ.” You will find Canadian-made products sold at duty-free shops marked this way. You can speed up your clearance by having your tobacco products available for inspection when you arrive.